[REN #690] Tiny Homes to the Rescue

Picture of tiny home interior for Real Estate News for Investors Podcast Episode #690

We’ve heard a lot about tiny homes lately. They’ve gotten tons of publicity as a more economical housing option for people who want to downsize and live with just a few possessions. Some cities are also embracing them as a way to house the homeless, including those who’ve lost homes to wildfires and other natural disasters. New reports confirm a growing interest in tiny homes among home buyers, but the jury is still out on whether this trend will mature into a mainstream phenomenon.

Property Shark published the results of a study analyzing eight years of sales data for the ten most populated U.S. cities, and divided the results according to home size. Tiny homes are less than 500 square feet. Mid-sized homes are between 500 and 1,000 square feet. And, larger homes are more than 1,000 square feet.

Tiny Homes Sales

The results show, the largest number of tiny homes and micro-apartments were sold in New York City and San Francisco, but those figures are not huge. They only account for about 2% of all sales in those two cities. Other cities only show only a sliver of sales for tiny homes. Mid-sized homes were more popular, but the bulk of sales were larger homes.

Overall, the report says, home sizes are getting smaller, but it shows that tiny homes are just a small fraction of the market. It also says, tiny homes may be more popular among young professionals and students who prefer renting over buying. Renting allows them to live in more expensive urban centers where they can’t afford to buy, and the smaller homes or apartments contribute to affordability. (1)

Tiny Home Appeal

Another survey appears to contradict the one by Property Shark. The National Association of Homebuilders conducted a survey last year on home buyer preferences. It found, more than half of the adults surveyed would either buy or consider buying a tiny home which it defined as 600 square feet or less. That’s a substantial number of people.

The numbers also skewed more heavily toward Millennials, with decreasing interest for tiny homes among older generations. 63% of Millennials said they would consider buying a tiny home while just 29% of seniors said the same. That could indicate, the trend won’t go far among the older folks, but will grow among Millennials and those who come after them. (2)

Tiny Homes Obstacles

Tiny homes are still fighting for acceptance as a real housing option. That’s mostly controlled by local zoning rules which may have restrictions on tiny home features, such as wheels. They may also have property size requirements which could make it too expensive to build a tiny home if it has to be on a large plot of land. As a granny unit or ADU (accessory dwelling unit), they may or may not be allowed. Getting a loan for a tiny home may also be difficult. The tiny home movement is experiencing incremental change, that could, at some point, turn the trend into a widely-accepted housing alternative.

Chico Tiny Home Village

The city of Chico in Northern California is contributing to that incremental change. According to NPR, the city just approved a proposal by a group called Chico Housing Action Team or CHAT for a community of 33 tiny homes called Simplicity Village. (3)

The proposal had been on the table for a few years, but it wasn’t until the city declared an emergency on homelessness last fall, which was followed by the wildfire that destroyed 14,000 homes, that city officials approved the idea. One third of the homes will be reserved for senior wildfire victims.

Each home will have a bed, a kitchenette, and a bathroom. Residents will also have access to larger buildings with a full-sized kitchen, laundry facilities, meeting rooms, and a workshop. Project organizers hope to break ground this April.

Tiny Home Movement

San Jose is also riding the tiny home wave with plans to build 80 tiny homes for the homeless. It will only help a handful of an estimated 4,000 homeless people in San Jose, but it’s an incremental improvement. Residents will be encouraged to move into permanent housing after six months.

Other communities are also experimenting with tiny homes. In Oakland, the city has set up three Tuff Shed encampments on city-owned land. They are expected to provide shelter for about 1,000 people total, or about half the number of homeless in Oakland.

They don’t provide a practical solution for everyone however. Most low-income households are families with children, that need a bigger space.

Property Shark says, it’s difficult to predict the future of tiny homes. It says that most developers are taking a “wait-and-see” approach. The blog says, we’ll probably see micro units pop up here and there but it remains to be seen if the trend will take off anytime soon.

My assistant Jill dreamed of buying a tiny home and actually found one in Southern California! It’s under 600 square feet but still cost more than the highest end rental properties we buy out of state. But more importantly, it came with a lot of land, which is even more valuable than the home.

You may have heard, our RV burned during the Malibu fires, so we received a check from insurance. But before buying a new RV, I told Rich that we didn’t really use it that much anyway, and maybe we would want to look into tiny homes instead.

We found out that if we buy a tiny home on wheels that is classified as an RV, we could park it in our driveway and not need permits for an ADU. So we bought a little tiny home on wheels that is a perfect guest house or potentially even an Airbnb. I might even use it as my office.

(1) Property Shark Report

(2) National Association of Home Builders Survey

(3) NPR Interview

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